Part A Overview - Bank Negara Malaysia A Overview ... Liquidity measurement ... view of the unique nature of equity business they conduct, where

Part A Overview ...............................................................................................................1

1. Introduction ....................................................................................................................1

2. Applicability ....................................................................................................................1

Part B Legal Provision ....................................................................................................2

3. Legal provision (Please refer to the BAFIA for full version of the law) .........................2

Part C Policy Requirements ...............................................................................................3

4. The broad concept .........................................................................................................3

5. Liquidity measurement...................................................................................................3

6. Liquefiable assets and formally available credit lines ...................................................6

Part D Compliance Requirements .................................................................................9

7. Standard setting and compliance requirement..............................................................9

8. Reporting requirements ...............................................................................................10

Part E Appendices.............................................................................................................12

Appendix 1 – Liquidity reporting form.................................................................................12

Appendix 2 – Additional notes on completing statistical returns........................................21

Appendix 3 – Benchmark treatment ...................................................................................26

BNM/RH/GL 001-07 Prudential Financial Policy Department

Liquidity Framework Page 1/28

PART A OVERVIEW

1. Introduction

1.1. In an effort to enhance liquidity management in banking institutions, Bank

Negara Malaysia (the Bank) introduced the Liquidity Framework in 1998 to

replace the liquid asset ratio requirement.

1.2. The Framework sets out to:-

1.2.1. create awareness among banking institutions of their funding

structure and their ability to handle short to medium-term liquidity

problems;

1.2.2. adopt a more efficient and on going liquidity measurement and

management for banking institutions; and

1.2.3. provide the Bank with a better means of assessing the present and

future liquidity position of banking institutions.

1.3. The Framework aims to address both institutional and market liquidity

concerns:

1.3.1. The ability of banking institutions to meet all maturing obligations is

assessed through the projection of the banking institutions’ inflows;

and

1.3.2. The Framework gauges the ability of banking institutions to access

funding from the market particularly under stress scenarios.

2. Applicability

2.1. The Liquidity Framework is applicable to all banking institutions licensed

under the Banking and Financial Institutions Act 1989 (BAFIA), namely

commercial banks, finance companies and investment banks/merchant

banks.



PART B LEGAL PROVISION

3. Legal provision (Please refer to the BAFIA for full version of the law)

3.1. The Liquidity Framework is issued pursuant to Section 126 of the Banking

and Financial Institutions Act 1989 (BAFIA).



PART C POLICY REQUIREMENTS

4. The broad concept

4.1. The main thrust of the Framework’s approach to liquidity management is

the projection up to 1 year of the maturity profile of a banking institution’s

assets, liabilities and off-balance sheet commitments from a given

position. The focus is on the ability of a banking institution to match its

short-term liquidity requirement arising from maturing obligations with

maturing assets, followed by a medium-term assessment of liquidity up to

1 year. The analysis will also be supported by some indicative ratios on

the banking institution’s funding structure, which serves to monitor whether

or not a banking institution is becoming over reliant on a particular funding

source.

4.2. Liquidity is assessed from three levels:

4.2.1. The first level assesses the sufficiency of a banking institution’s

liquidity in the normal course of its business over the next few

months.

4.2.2. The second level assesses whether or not a banking institution has

the capacity to withstand liquidity withdrawal shocks.

4.2.3. The third level assesses a banking institution’s general funding

structure, in particular, to assess the degree of dependency on

certain known volatile markets.

5. Liquidity measurement

5.1. First level liquidity measurement

5.1.1. The liquidity measurement framework begins with a maturity ladder

profile of five maturity bands beginning from “up to 1 week” (“up to 3

days” for investment banks) to a “6 to 12 month” band. Banking

institutions’ assets, liabilities and off-balance sheet commitments



are slotted into the relevant time bands according to the period they

are expected to mature or be called upon.

Table 1 Maturity buckets for commercial banks and investment banks

Commercial banks Investment banks

Up to 1 week Up to 3 days

1 week to 1 month 4 days to 1 month

1 to 3 months

3 to 6 months

6 months to 1 year

More than 1 year

5.1.2. Investment banks face a slightly different maturity profile ladder in

view of the unique nature of equity business they conduct, where

short-term cash flows associated with brokerage activities are

experienced.

5.1.3. The primary basis for determining the appropriate time bands is the

contractual maturity, which is when the cash flows crystallize.

Nevertheless, a number of assets and liabilities experience

premature upliftments or, conversely, regular rollover

characteristics in their normal course of business, thus deviating in

reality from their contractual maturity. Adjustments are permitted for

these asset and liabilities to reflect instead their “behavioural”

maturity.

5.1.4. Behavioural maturity – As a guide to banking institutions, the Bank

provides a list of recommended treatment to arrive at the

behavioural maturity of loans, deposits and undrawn commitments.

Nevertheless, banking institutions will be permitted to employ their

own in-house method (if available) provided they are able to justify

to the Bank that their method provides a more accurate alternative.

To ensure that due diligence is applied to the projection of

behavioural maturity, Bank Negara Malaysia will require that the

method and assumptions employed by the banking institution be



considered and endorsed by the banking institution’s Asset-Liability

Management Committee (ALCO) before seeking the approval of the

Bank. The methods approved should be used consistently and any

subsequent changes should also be endorsed by the banking

institution’s ALCO and approved by Bank Negara Malaysia.

5.1.5. The objective of the assessment of liquidity at this level is to arrive

at a projected net maturity mismatch profile of a banking institution

stretching from 1 week (3 days for investment banks) to 1 year.

5.2. Second level liquidity measurement

5.2.1. At the second level, the focus of assessment is whether a banking

institution has sufficient liquidity surplus and reserves to sustain a

sudden liquidity withdrawal shock arising from a banking institution

specific crisis.

5.2.2. Building on the net maturity mismatch profile earlier, liquidity

measurement at this level takes into account the additional

emergency funds that can be quickly realized from the sale of

liquefiable assets (that is to bring forward their maturity date) or

drawn upon from formally available credit lines.

5.2.3. On average, Bank Negara Malaysia expects banking institutions to

sustain heavy withdrawals up to a period of 1 month. The

compliance requirement as described in paragraph 7.5 reflects the

typical rate of heavy withdrawals that Bank Negara Malaysia

expects to take place during a crisis.

5.2.4. To test the banking institution’s ability to withstand the crisis, the

adjusted maturity profile is then compared with the potential amount

of “heavy withdrawals” that can take place during a crisis. In other

words, the available cumulative mismatch to accommodate liquidity

shocks has to be greater than the compliance requirement.

5.2.5. The actual quantum varies f r om banking institution to banking

institution depending on their funding structure and will be a matter

to be agreed between Bank Negara Malaysia and the banking

institution on a case-by-case basis. Banking institutions will



normally be expected to demonstrate the availability of liquidity

surplus and reserves that can support such fall in deposits.

5.3. Third level liquidity measurement

5.3.1. The third level of measurement consists of a series of broad ratios

and supplementary information designed to indicate the extent of

which a banking institution is dependent on a particular market for

its funding sources. The coverage includes:

· large customer deposits

· interbank market

· offshore market

5.3.2. This information will allow the banking institutions to assess its

exposure to liquidity risk in the event of disruptions in the relevant

markets.

6. Liquefiable assets and formally available credit lines

6.1. The maintenance of liquefiable assets and formally available credit lines

hold value for a banking institution in coping with unexpected heavy

withdrawals. This fact is taken into account under the second level liquidity

measurement as explained in paragraph 5.1.5.

6.2. Definition of liquefiable assets – T here is no explicit definition as to what

constitutes liquefiable assets. Under the previous liquid asset ratio

framework, some assets were granted “liquid asset status” for purpose of

promoting the primary purchases of the assets rather than for their actual

liquidity value. To ensure that the determination of liquefiable assets is on

a more consistent and objective manner, a set of “qualifying

characteristics” for the recognition of liquefiable assets has been identified

under the Liquidity Framework. The qualifying characteristics for

liquefiable assets are as follows:

· assets easily convertible in large sums into cash at short notice;

· low counter-party credit risks;



· free from any encumbrances that restricts its sale or repo

capability (for example, not pledged to third parties or under repo

agreements); and

· have sufficiently deep secondary market or repo market which

continue to exist during tight liquidity situations, or which Bank

Negara Malaysia is prepared to purchase, lend or allowed for repo

in the course of its money market or liquidity support operation.

6.3. Assets held under reverse repo are also eligible for liquefiable asset status

for the period under the reverse repo. Assets sold under repo will not be

eligible only for the period under repo.

6.4. To reflect a more conservative value of funds that can be raised from the

sale of liquefiable assets under desperate circumstances, the value of

liquefiable assets will be measured at a discount to its mark-to-market

value.

6.5. Assets that fulfill the qualifying characteristics specified in paragraph 6.2

are known as Class-1 liquefiable assets.

6.6. It is also recognized that a number of other debt instruments which are

subject to individual issuer credit consideration and thus with less assured

liquidity quality can assist in raising funds for banking institutions

experiencing short-term liquidity problem either through outright sale or

repo agreements. These assets may also be considered as liquefiable

assets a l though for valuation purposes, they will be subject to higher

discounts. These are known as Class-2 liquefiable assets.

6.7. Formally available credit lines are arranged irrevocable credit facilities

which the banking institution has paid a consideration for. The undrawn

portion provides a reserve which the banking institution can draw upon

during liquidity crisis. To qualify:

· the facilities must be irrevocably available for at least the next 3

months;

· the funds must be available for immediate drawdown at any time.

They must not be subject to availability of funds clause; and



· the provider of the facility must be banking institutions that are

normally capable of providing large volume of funds at short

notice.

6.8. To avoid over-reliance on Class-2 liquefiable assets and from formally

available credit lines as the primary source of reserve liquidity, the total

amount allowable to be recognised should not comprise more than 50% of

the Class-1 liquefiable assets1.

6.9. Investment banks are allowed to classify KLSE Main Board equities held in

their proprietary book (that are subject to daily mark-to-market) as

liquefiable assets subject to a forced sale discount or at the fair value of

the equity, whichever is lower.2

6.10. The stock of liquefiable assets that may be drawn upon when coping with

unexpected heavy withdrawals are listed in Part 4 of Appendix 1, along

with the respective forced sale discount factors to be applied.

1 With effect from 3 September 2004. Previously, the limit was 30%.

2 With effect from 1 July 2005.



PART D COMPLIANCE REQUIREMENTS

7. Standard setting and compliance requirement

7.1. Unlike the previous liquid asset ratio regime, the current liquidity

framework does not emphasise on rigid compliance with a particular ratio.

Its flexible nature provides a platform where the liquidity profile of a

banking institution can be systematically projected for analysis between

Bank Negara Malaysia and the banking institution concerned. This

enables the Bank to discuss with the banking institution concerned and

arrest in advance any disturbing trend that may affect the future liquidity

positions of the banking institution. The discussion with the banking

institution will assist the Bank in determining the appropriate compliance

requirement to be observed by the individual banking institution.

7.2. Bank Negara Malaysia will look towards the banking institution’s ALCO as

the body primarily responsible for the management of liquidity.

7.3. As a minimum standard, however, banking institutions are required to

maintain sufficient cash flows to cope with events of unusually heavy

withdrawals. Banking institutions are required to maintain a specified

minimum surplus in the cumulative net maturity mismatch of the “1 week”

(“3 days” for investment banks) and “1 month” liquidity buckets as

measured under the second level liquidity measurement enumerated in

paragraph 5.1.5.

7.4. The available cumulative mismatch to accommodate liquidity shocks

should be not less than the compliance requirement as agreed with the

Bank.



7.5. The net compliance surplus should be positive for the first two maturity

buckets with the compliance requirement for specific banking institutions

specified as follows:

For commercial banks:

Maturity bucket Compliance requirement3

Up to 1 week 3%

1 week to 1 month 5%

For investment banks:

Maturity bucket Compliance requirement4

Up to 3 days 3%

4 days to 1 month 5%

8. Reporting requirements

8.1. Banking institutions are required to submit to Bank Negara Malaysia via

the Financial Institutions Statistical System (FISS) under the Report on

Liquidity Framework (RLFM) the following information:

· Maturity profile of all balance sheet items and off-balance sheet

items denominated in Ringgit Malaysia (RM), reported according

to maturity in which have been adjusted for behavioural pattern

prevailing at the reporting date;

· Maturity profile of all balance sheet and off-balance sheet items

denominated in foreign currency, reported according to maturity

which have been adjusted for behavioural pattern prevailing at the

reporting date;

3 With effect from 30 September 1999.





items denominated in RM reported according to pure contractual

maturity (no behavioural adjustment);


items denominated in foreign currency, reported according to pure

contractual maturity (no behavioural adjustment);

· Supplementary information on funding structure; and

· Stock of liquefiable assets.

8.2. An illustration of the statistical returns is detailed in Appendix 1.



PART E APPENDICES

Appendix 1 – Liquidity reporting form

List of statistical returns

Part 1-RM Maturity profile of all balance sheet items and off-balance sheet items

denominated in Ringgit Malaysia (RM), reported according to

maturity which have been adjusted for behavioural pattern prevailing

at the reporting date

Part 1-F$ Maturity profile of all balance sheet items and off-balance sheet items

denominated in foreign currency; reported according to maturity

which have been adjusted for behavioural pattern prevailing at the

reporting date

Part 2-RM Maturity profile of all balance sheet items and off-balance sheet items

denominated in RM reported according to pure contractual maturity

(no behavioural adjustment)

Part 2-F$ Maturity profile of all balance sheet items and off-balance sheet items

denominated in foreign currency, reported according to pure

contractual maturity (no behavioural adjustment)

Part 3 Supplementary information on funding structure

Part 4 Stock of liquefiable assets



LIQUIDITY FRAMEWORK

Name of institution : Reporting date :

SUMMARY OF MATURITY MISMATCH REPORTING

Maturity Tenor Buckets up to 1 wk^ > 1 wk - 1 mth* >1 - 3 mths >3 - 6 mths >6 mths - 1 yr > 1 year Total

CORE (NON-TRADING) BANKING ACTIVITIES

1 Net Maturity Mismatch (A1.30) - Part 1-RM - - - - - - -

2 Net Maturity Mismatch (B1.30) - Part 1-F$ - - - - - - -

ADD

TREASURY AND CAPITAL MARKET ACTIVITIES

3 Net Maturity Mismatch (A2.37) - Part 1-RM - - - - - - -

4 Net Maturity Mismatch (B2.37) - Part 1-F$ - - - - - - -

EQUALS

5 Total Net Maturity Mismatch Under Normal Circumstances - - - - - - -

ADD

6

Discounted value of liquefiable securities & Undrawn portion of

formally available credit lines (4) - Part 4 -

LESSTo eliminate double counting of liquefiable securities

7

"Debt Securities and Equities Held" (asset) entries as reported in Part

I return belonging to assets qualifying as liquefiable assets (excl. repo-ed securities)

8

"Reverse Repo" (asset) entries as reported in Part I return involving

securities qualifying as liquefiable assets

LESSTo recognise repoed securities as liquefiable assets upon maturity of repo

9A

"Securities Held" (asset) entries as reported in Part I return belonging

to repoed securities that would have qualified as liquefiable assets upon maturity of the repo

9B

"Repo" (liability) entries as reported in Part I return involving securities

that would have qualified as liquefiable assets upon maturity of the repo

EQUALS

10 Available net mismatch to accommodate liquidity shocks - - - - - - -

CONVERT TO CUMULATIVE PROFILE

11

Available cumulative mismatch to accommodate liquidity shocks - - - - - -

LESSNote 1 Note 2

12 Compliance requirement as agreed with BNM

EQUALS

13 Net compliance surplus/(shortfall) - -

Note 1 : Report 3% of total outstanding deposits (current, savings and fixed deposit accounts) as at reporting dateNote 2 : Report 5% of total outstanding deposits (current, savings and fixed deposit accounts) as at reporting date

Note 3 : Round all figures to the nearest RM MillionNote 4 : All outflows should be reported in brackets ( )

For investment banks^ up to 3 days* 4 days - 1 mth

Signature :…………………………..



PART 1-RMBreakdown by Behavioural Maturity Profile - Ringgit

REF: I. CORE (NON-TRADING) BANKING ACTIVITIES

up to 1 wk^ > 1 wk - 1 mth* > 1 mth - 3 mths > 3 - 6 mths > 6 mths - 1 yr > 1 year Total

INFLOWS (ASSETS)

On-Balance Sheet

A1.1 Loans : Non-individuals - Fixed Term Loans -

A1.2 - Revolving Loans -

A1.3 - Overdrafts -

A1.4 - Others -

A1.5 Individuals - Housing Loans -

A1.6 - Credit Cards -

A1.7 - Overdrafts -

A1.8 - Others -

Miscellanous

A1.9 Cash holdings

A1.10 SRR -

A1.11 Other assets -

OUTFLOWS (LIABILITIES)

On-Balance Sheet

A1.12 Deposits : Non-individuals - Fixed -

A1.13 - Savings -

A1.14 - Current -

A1.15 Individuals - Fixed -

A1.16 - Savings -

A1.17 - Current -

Miscellanous

A1.18 Debt securities issued (Subordinated-loans, ICULS,etc) -

A1.19 Funds raised through securitisation with recourse -

A1.20 Shareholders' funds and other liabilities -

Off-Balance Sheet -

Credit and other commitments-with certain cash flows

A1.21 Undrawn loans -

A1.22 Others -

Credit and other commitments - with uncertain cash flows

A1.23 Underwriting obligation : debt -

A1.24 equity -

A1.25 Undrawn OD facilities given -

A1.26 Undrawn Margin Financing facilities

A1.27 Undrawn portion of revolving credit facilities given -

A1.28 Guarantees/Standby Letter of Credits -

A1.29 Undrawn portion of other credit facilities given -

A1.30 Net Maturity Mismatch - - - - - - -

REF: II. TREASURY AND CAPITAL MARKET ACTIVITIES


INFLOWS (ASSETS)

On-Balance Sheet

A2.1 Interbank lending/deposits -

A2.2 Reverse repo -

A2.3 Debt securities : -

A2.4 Financial institution papers (incl. NIDs) -

A2.5 Trade papers (BAs and trade bills) -

A2.6 Corporate debts : (govt.-guaranteed) -

A2.7 (bank-guaranteed) -

A2.8 (non-guaranteed -

A2.9 Equities (Proprietary)

Brokerage activities

A2.10 Amounts Due From: Margin Clients

A2.11 Non-margin Clients

A2.12 SCANS

A2.13 Other Brokers

A2.14 Other Debtors

A2.15 Client Trusts, Deposits and Refund Money

Off-Balance Sheet

Derivatives(Long RM Positions)- with certain cash flows

A2.16 Foreign exchange contracts receivable (spot/forward/swap) -

A2.17 Equity-linked derivative contracts receivable -

Derivatives(Long RM Positions)- with uncertain cash flows

A2.18 FX options (delta equiv.) : purchase (bought) -

A2.19 written (sold) -

A2.20 Other derivatives (delta equiv.) receivable -


On-Balance Sheet

A2.21 Interbank borrowings/deposits -

A2.22 Interbank Repos -

A2.23 Non-interbank Repos -

A2.24 NIDs issued -

A2.25 BAs payable -


A2.26 Amounts Due To:: Margin Clients


A2.28 SCANS

A2.29 Other Brokers

A2.30 Other Debtors


Off-Balance Sheet

Derivatives(Short RM Positions)- with certain cash flows

A2.32 Foreign exchange contracts payable (spot/forward/swap) -

A2.33 Equity-linked derivative contracts payable -

Derivatives(Short RM Positions)- with uncertain cash flows



A2.36 Other derivatives (delta equiv.) payable -


Net Total Maturity Mismatch (A1.30 + A2.37) - - - - - - -

Note : (1) Round all figures to the nearest RM million

(2) All outflows should be reported in brackets ( )

For investment banks ^ up to 3 days* 4 days - 1 mth

Government papers/BNM bills/Cagamas papers



PART 1-F$Breakdown by Behavioural Maturity Profile - Foreign Currency



INFLOWS (ASSETS)

On-Balance Sheet

B1.1 Loans : Non-individuals - Fixed Term Loans -

B1.2 - Revolving Loans -

B1.3 - Overdrafts -

B1.4 - Others -

B1.5 Individuals - Housing Loans -

B1.6 - Credit Cards -

B1.7 - Overdrafts -

B1.8 - Others -

Miscellanous

B1.9 Cash holdings

B1.10 SRR -

B1.11 Other assets -


On-Balance Sheet

B1.12 Deposits : Non-individuals - Fixed -

B1.13 - Savings -

B1.14 - Current -

B1.15 Individuals - Fixed -

B1.16 - Savings -

B1.17 - Current -

Miscellanous

B1.18 Debt securities issued (Subordinated-loans, ICULS,etc) -

B1.19 Funds raised through securitisation with recourse -

B1.20 Shareholders' funds and other liabilities -

Off-Balance Sheet -


B1.21 Undrawn loans -

B1.22 Others -


B1.23 Underwriting obligation : debt -

B1.24 equity -

B1.25 Undrawn OD facilities given -

B1.26 Undrawn Margin Financing facilities

B1.27 Undrawn portion of revolving credit facilities given -

B1.28 Guarantees/Standby Letter of Credits -

B1.29 Undrawn portion of other credit facilities given -

B1.30 Net Maturity Mismatch - - - - - - -



INFLOWS (ASSETS)

On-Balance Sheet

B2.1 Interbank lending/deposits -

B2.2 Reverse repo -

B2.3 Debt securities : -

B2.4 Financial institution papers (incl. NIDs) -

B2.5 Trade papers (BAs and trade bills) -

B2.6 Corporate debts : (govt.-guaranteed) -

B2.7 (bank-guaranteed) -

B2.8 (non-guaranteed -

B2.9 Equities (Proprietary)


B2.10 Amounts Due From: Margin Clients

B2.11 Non-margin Clients

B2.12 SCANS

B2.13 Other Brokers

B2.14 Other Debtors

B2.15 Client Trusts, Deposits and Refund Money

Off-Balance Sheet


B2.16 Foreign exchange contracts receivable (spot/forward/swap) -

B2.17 Equity-linked derivative contracts receivable -


B2.18 FX options (delta equiv.) : purchase (bought) -

B2.19 written (sold) -

B2.20 Other derivatives (delta equiv.) receivable -


On-Balance Sheet

B2.21 Interbank borrowings/deposits -

B2.22 Interbank Repos -

B2.23 Non-interbank Repos -

B2.24 NIDs issued -

B2.25 BAs payable -


B2.26 Amounts Due To:: Margin Clients


B2.28 SCANS

B2.29 Other Brokers

B2.30 Other Debtors


Off-Balance Sheet


B2.32 Foreign exchange contracts payable (spot/forward/swap) -

B2.33 Equity-linked derivative contracts payable -




B2.36 Other derivatives (delta equiv.) payable -


Net Total Maturity Mismatch (B1.30 + B2.37)







PART 2-RMBreakdown by Pure Contractual Maturity Profile - Ringgit



INFLOWS (ASSETS)

On-Balance Sheet

A1.1 Loans : Non-individuals - Fixed Term Loans -

A1.2 - Revolving Loans -

A1.3 - Overdrafts -

A1.4 - Others -

A1.5 Individuals - Housing Loans -

A1.6 - Credit Cards -

A1.7 - Overdrafts -

A1.8 - Others -

Miscellanous

A1.9 Cash holdings

A1.10 SRR -

A1.11 Other assets -


On-Balance Sheet

A1.12 Deposits : Non-individuals - Fixed -

A1.13 - Savings -

A1.14 - Current -

A1.15 Individuals - Fixed -

A1.16 - Savings -

A1.17 - Current -

Miscellanous

A1.18 Debt securities issued (Subordinated-loans, ICULS,etc) -

A1.19 Funds raised through securitisation with recourse -

A1.20 Shareholders' funds and other liabilities -

Off-Balance Sheet -


A1.21 Undrawn loans -

A1.22 Others -


A1.23 Underwriting obligation : debt -

A1.24 equity -

A1.25 Undrawn OD facilities given -

A1.26 Undrawn Margin Financing facilities

A1.27 Undrawn portion of revolving credit facilities given -

A1.28 Guarantees/Standby Letter of Credits -

A1.29 Undrawn portion of other credit facilities given -




INFLOWS (ASSETS)

On-Balance Sheet

A2.1 Interbank lending/deposits -

A2.2 Reverse repo -

A2.3 Debt securities : -

A2.4 Financial institution papers (incl. NIDs) -

A2.5 Trade papers (BAs and trade bills) -

A2.6 Corporate debts : (govt.-guaranteed) -

A2.7 (bank-guaranteed) -

A2.8 (non-guaranteed -

A2.9 Equities (Proprietary)


A2.10 Amounts Due From: Margin Clients


A2.12 SCANS

A2.13 Other Brokers

A2.14 Other Debtors


Off-Balance Sheet


A2.16 Foreign exchange contracts receivable (spot/forward/swap) -

A2.17 Equity-linked derivative contracts receivable -




A2.20 Other derivatives (delta equiv.) receivable -


On-Balance Sheet

A2.21 Interbank borrowings/deposits -

A2.22 Interbank Repos -

A2.23 Non-interbank Repos -

A2.24 NIDs issued -

A2.25 BAs payable -


A2.26 Amounts Due To:: Margin Clients


A2.28 SCANS

A2.29 Other Brokers

A2.30 Other Debtors


Off-Balance Sheet


A2.32 Foreign exchange contracts payable (spot/forward/swap) -

A2.33 Equity-linked derivative contracts payable -




A2.36 Other derivatives (delta equiv.) payable -


Net Total Maturity Mismatch (A1.30 + A2.37) - - - - - - -







PART 2-F$Breakdown by Pure Contractual Maturity Profile - Foreign Currency



INFLOWS (ASSETS)

On-Balance Sheet

B1.1 Loans : Non-individuals - Fixed Term Loans -

B1.2 - Revolving Loans -

B1.3 - Overdrafts -

B1.4 - Others -

B1.5 Individuals - Housing Loans -

B1.6 - Credit Cards -

B1.7 - Overdrafts -

B1.8 - Others -

Miscellanous

B1.9 Cash holdings

B1.10 SRR -

B1.11 Other assets -


On-Balance Sheet

B1.12 Deposits : Non-individuals - Fixed -

B1.13 - Savings -

B1.14 - Current -

B1.15 Individuals - Fixed -

B1.16 - Savings -

B1.17 - Current -

Miscellanous

B1.18 Debt securities issued (Subordinated-loans, ICULS,etc) -

B1.19 Funds raised through securitisation with recourse -

B1.20 Shareholders' funds and other liabilities -

Off-Balance Sheet -


B1.21 Undrawn loans -

B1.22 Others -


B1.23 Underwriting obligation : debt -

B1.24 equity -

B1.25 Undrawn OD facilities given -

B1.26 Undrawn Margin Financing facilities

B1.27 Undrawn portion of revolving credit facilities given -

B1.28 Guarantees/Standby Letter of Credits -

B1.29 Undrawn portion of other credit facilities given -




INFLOWS (ASSETS)

On-Balance Sheet

B2.1 Interbank lending/deposits -

B2.2 Reverse repo -

B2.3 Debt securities : -

B2.4 Financial institution papers (incl. NIDs) -

B2.5 Trade papers (BAs and trade bills) -

B2.6 Corporate debts : (govt.-guaranteed) -

B2.7 (bank-guaranteed) -

B2.8 (non-guaranteed -

B2.9 Equities (Proprietary)


B2.10 Amounts Due From: Margin Clients


B2.12 SCANS

B2.13 Other Brokers

B2.14 Other Debtors


Off-Balance Sheet


B2.16 Foreign exchange contracts receivable (spot/forward/swap) -

B2.17 Equity-linked derivative contracts receivable -




B2.20 Other derivatives (delta equiv.) receivable -


On-Balance Sheet

B2.21 Interbank borrowings/deposits -

B2.22 Interbank Repos -

B2.23 Non-interbank Repos -

B2.24 NIDs issued -

B2.25 BAs payable -


B2.26 Amounts Due To:: Margin Clients


B2.28 SCANS

B2.29 Other Brokers

B2.30 Other Debtors


Off-Balance Sheet


B2.32 Foreign exchange contracts payable (spot/forward/swap) -

B2.33 Equity-linked derivative contracts payable -




B2.36 Other derivatives (delta equiv.) payable -


Net Total Maturity Mismatch (B1.30 + B2.37)







PART 3

Supplementary Information

I.

1 - 2% of TD 2 - 3% of TD 3 - 5% of TD 5 - 10-% of TD > 10% of TD

Number of customers (group of customers)

TD : Total Deposit

II. Concentration of Funding Sources

Weekend

Average for the

month (%)

Adjusted loan/deposit ratio

Net offshore borrowing / Total domestic deposit liabilities

Net domestic interbank borrowing / Total domestic deposit liabilities

Short term gross domestic interbank borrowing / Short term domestic total funding

Distribution profile of customer (or group of related customers) deposits/repos/NIDs which accounts for

1% or more of total deposit (Saving, Current and Fixed Deposits, non-interbank Repos and non-

interbank NIDs)

Total net domestic overnight interbank borrowing / Total gross domestic interbank borrowing less overnight domestic

interbank lending



Part 4

Stock of Liquefiable Assets5

(1) (2) (3) (4)

Liquefiable Securities

Market value of

securities reported in

books (excl.

securities repoed out)

(RM m)

Market value of

securities received

under reverse

repo (excl. securities re-repoed

out) (RM m)

"Forced Sale"

Discount to be Applied Based on

Yield Slippage

(%)

Total Value of

Securities After

Discount (RM m)

Class-1 liquefiable assets

RM Marketeable securities/papers issued by Federal Government or BNM (including papers issued by Khazanah Malaysia)6

2

RM Marketeable securities/papers guaranteed by Federal Government or BNM

3

Danaharta bonds7 3

Danamodal bonds8 4

Cagamas bonds and notes (both conventional and Islamic) issued before 4 September 2004

4

RM-denominated bonds issued by Multilateral Development Banks or Multilateral Financial Institutions9

6

ABF Malaysia Bond Index Fund10 3

Subtotal – Class-1 liquefiable assets

Class-2 liquefiable assets & available credit lines11

5 Short-term rating (P1, P2, MARC1 and MARC2) only apply to papers with remaining maturity less

than 1 year. 6 Includes Sukuk Bank Negara Malaysia – Ijarah with effect from 7 February 2006.

7 With effect from 13 November 1998.

8 With effect from 13 November 1998.

9 With effect from 6 October 2004.


11 Institutions should limit the reporting of Class-2 liquefiable assets and undrawn credit lines to not

more than 50% of the Class-1 liquefiable assets reported. Any excess liquefiable assets will not qualify and should not be reported here.



Bankers’ Acceptances (excluding own BAs) issued by at least AA/P2/MARC2 rated institutions

4

Bankers’ Acceptances (excluding own BAs) issued by non-AA/P2/MARC2 rated institutions

6

NIDs (excluding own-issued NIDs) issued by at least AA/P2/MARC2 rated institutions

6

Cagamas bonds and notes (both conventional and Islamic) issued after 4 September 200412

6

RM Corporate bonds and papers with at least AAA/P1/MARC1 rating or its equivalent

1013

Residential mortgaged-backed securities with AAA rating14

6

Undrawn potion of formally available credit lines (please provide detailed breakdown below)

Subtotal – Class-2 liquefiable assets and & available credit lines (restrict to 50% of Class-1 liquefiable assets)

Equities classified as liquefiable assets15 30

Total

Formally Available Credit Lines

Name of providers Undrawn Portion

(RM m) Drawn Portion

(RM m)

Total (please carry forward undrawn amount to table above)

Note : Round all figures to the nearest RM million

12

With effect from 4 September 2004. 13

With effect from 3 September 2004. Previously, the forced sale discount was set at 8%. 14

With effect from 17 September 2004. 15

Applicable only to investment banks.



Appendix 2 – Additional notes on completing statistical returns

1. Part 1 Return: behavioural maturity profile

1.1. All balance sheet assets and liabilities must be reported. Items A&B1.1 to A&B1.11 plus A&B2.1 to A&B2.15 less A1.19 must equal to total assets as reported in item 30000 of the FISS return.

1.2. Items A&B1.12 to A&B1.20 plus A&B2.21 to A&B2.31 less A1.19 must be equal to total liabilities and capital (shareholders’ fund) as reported in item 40000 of the FISS return.

1.3. Items on each line should be slotted into the relevant time bucket which they are expected to mature. In most cases, these are based on their contractual maturity. However, certain items, in particular loans, deposits and credit commitments do not normally experience maturing cash flows in accordance to their contractual maturity. Loans, for example, may be rolled over when due rather than repaid or go into default. Deposits, on the other hand, are subject to premature withdrawal and renewal characteristics. For such items, they should be slotted instead according to their perceived behavioural maturity.

1.4. To arrive at the appropriate treatment for each item, Appendix 3 contains a list of recommended treatment for allocating the cash flow items in their relevant time buckets. Nevertheless, banking institutions are permitted to differ and employ their own in-house method (if available) provided they are able to justify to BNM that they provide a more accurate alternative. Any variation to the recommended method should be agreed with BNM before they are incorporated.

2. Part 2 Return: contractual maturity profile

2.1. All balance sheet assets and liabilities must be reported. Items A&B1.1 to A&B1.11 plus A&B2.1 to A&B2.15 less A1.19 must be equal to total assets as reported in item 30000 of the FISS return.

2.2. Items A&B1.12 to A&B1.20 plus A&B2.21 to A&B2.31 less A1.19 must be equal to total liabilities and capital (shareholders’ fund) as reported in item 40000 of the FISS return.

2.3. All cash flow items should be slotted into the relevant time buckets according to their strict contractual maturity regardless of their actual behaviour. Liabilities repayable on demand such as demand and saving deposits should be slotted into the “up to 1 week” bucket), while assets that have no strict contractual maturity such as investment in property should be slotted in the “more than 1 year” bucket.



3. Part 3 Return: supplementary information

3.1. The supplementary information encompasses all RM and foreign currency denominated items (foreign currency denominated items are reported in their RM equivalent). They are as follows:

Item I To report distribution profile of deposits from a customer or group of

related customers which account for more than 1% of an institution’s

total deposit base (Savings, Current and Fixed Deposit accounts plus

non-interbank Repos and non-interbank NIDs); and

Item II Concentration of funding sources – comprises a set of financial ratios

to be calculated as below. Please report the weekend average ratio for

the month.

3.2. Ratio 1: Adjusted Loan/Deposit Ratio

Adjusted Loans Gross loans less BA payable

Adjusted Deposit All deposits, non-interbank repos and

non-interbank NIDs (less percentage set

aside for SRR) plus shareholders’ funds

plus other hybrid Tier-2 c a p i t a l

instruments (e.g. ICULS, preference

shares) plus subordinated term-loans

issued plus loans sold to Cagamas plus

ECR/BNM refinancing.



3.3. Ratio 2: Net offshore borrowing / Total domestic deposit liabilities

Net offshore borrowing All deposits, NIDs, repos and interbank

borrowing (including vostro accounts) in

both RM and F$ from non-residents

Less

Deposits placed, NIDs held, reverse

repos and interbank lending (including

nostro accounts) in both RM and F$ with

non-residents.

Total domestic deposit liabilities All deposits, non-interbank repos and

non-interbank NIDs in both RM and F$

from domestic residents.

3.4. Ratio 3: Net domestic interbank borrowing / Total domestic deposit liabilities

Net domestic interbank borrowing Interbank borrowing, interbank repos

and interbank NIDs in both RM and F$

from resident banks

Less

Interbank lending, interbank reverse

repo and NIDs held in both RM and F$

with resident banks.

Total domestic deposit liabilities All deposits, non-interbank repos and

non-interbank NIDs in both RM and F$

from domestic residents.



3.5. Ratio 4: Total net domestic overnight interbank borrowing / Total gross domestic interbank borrowing less overnight domestic interbank lending

Total net overnight borrowing Total overnight interbank borrowing from

the domestic market less total overnight

interbank lending to the domestic

market.

Total gross domestic interbank

borrowing less overnight

domestic interbank lending

Total interbank borrowing, interbank

repos and interbank NIDs from the

domestic market less overnight interbank

lending to the domestic market.

3.6. Ratio 5: Short term gross domestic interbank borrowing / Short term domestic total funding

Short-term gross domestic

interbank borrowing

Total interbank borrowing, interbank

repos and interbank NIDs from the

domestic market with remaining maturity

of up to 1 month.

Short-term domestic total funding All deposits, repos and NIDs, and

interbank borrowing from domestic

residents with remaining maturity of up

to 1 month.

4. Part 4 Return: Stock of liquefiable assets

4.1. The amount of Class-2 liquefiable assets (and undrawn formally available credit lines) reported here should not exceed 50% of reported Class-1 liquefiable assets. The balance of excess Class-2 liquefiable assets (if any) will continue to be reported in the maturity ladder set out in Appendix 1 Part 1.

4.2. All securities under columns (1) and (2) must be reported at their market values.

4.3. To arrive at the total discounted values under column (4), the securities reported under columns (1) and (2) must be further discounted using the yield slippage provided in column (3).



4.4. For KLSE Main Board equities held in their proprietary book, the lower of the daily mark-to-market values subject to a force sale discount or the fair value of the equity is to be reported.

5. Summary of maturity mismatch reporting

Row 7 Securities to be reported (reverse out) in row 7 should

only be the securities that qualify as liquefiable assets in

the Part 4 Statistical Return: Stock of Liquefiable

Assets. In particular, for securities that are Class-2

liquefiable assets, do not report those that fall outside

the 50% eligible limit.

Row 9A and 9B All Class-1 liquefiable assets that are under repo at the

date of reporting must be reported here. For Class-2

liquefiable assets that are under repo, report only if the

50% limit reportable in the Part-4 statistical return for

Class-2 liquefiable assets has not been fully utilised.

Row 9A should be reported according to the maturity of

the underlying securities, whilst Row 9B should be

reported according to the maturity of the repo.



Appendix 3 – Benchmark treatment

Benchmark treatment for specific items in Part 1 Return16

Items Benchmark treatment

Fixed term & housing loans

Report based on contractual maturity subject to adjustment for NPL (whose amount is to be slotted in the “> 1 year bucket”), including loans sold to Cagamas Berhad.

Revolving credit/loans Report according to end-date of the facility.

Overdrafts & Credit cards

A core balance (lowest amount outstanding during period under observation) is to be identified and slotted into “> 1 year bucket”. The remaining balance to be allocated evenly across the rest of the maturity buckets.

SRR Slot into the “> 1 year bucket” or adjust according to movements in the EL base.

Fixed/Savings/Current deposit account

See “Benchmark process for allocating fixed/savings/current account deposits according to maturity tenor buckets under behavioural maturity process”. Alternative treatment17 for fixed deposits offered by investment banks 30% of the amounts contractually due in the next 1 year to be placed in the respective buckets with the residual 70% slotted in the “> 1 year bucket”. Also report amounts contractually due more than 1 year in the “> 1 year bucket”.

Funds raised through securitisation with recourse

Funds raised from Cagamas with recourse can be deemed to be rolled over upon maturity.

Undrawn credit and other commitments with

20% of undrawn amount at the reporting date is to be slotted into the first maturity bucket.

16

Benchmark treatment for investment banks issued on 9 March 2007. 17

The alternative benchmark treatment is only applicable to institutions that do not have the systems

capabilities to capture daily volatility of deposits. The ALCO of such institutions are required to assess

the appropriateness of this alternative treatment for their institutions. In addition, institutions adopting

this approach are expected to notify BNM on the time frame required to enhance their system

capabilities in order to meet the primary benchmark treatment.



uncertain drawdown (including Undrawn Margin Financing Facilities but excluding Guarantees/Standby Letter of Credits)

Guarantees/Standby Letter of Credits

Amount to be reported will be based on each banking institution’s expectation of potential call on the guarantees/standby letter of credits.

Brokerage Activities (except SCANS)18

70% of amounts as at the reporting date are to be slotted into the up to 3 days bucket. The residual amount is to be slotted into the “4 days to 1 month bucket”.

SCANS19 All amounts are slotted into the “up to 3 days bucket”.

Equities (Proprietary)20

No proprietary equity positions to be placed in the “up to 3 days” and “4 days to 1 month” buckets. Equity positions are to be distributed equally into the remaining buckets.

Balance of all other items Report according to their contractual maturity.

18

Applicable to investment banks only. 19

Applicable to investment banks only. 20

Applicable to investment banks only.

Benchmark process for allocating fixed/savings/current account deposits according to maturity tenor buckets under behavioural maturity process

Step 1 Calculate the largest change that can occur within a 1

week period21 during the last 1 year22

Calculate the largest change that can occur within a 1

month period during the last 1 year





Calculate the largest change that can

occur within a 1 year period during the

last 1 year

Step 2 Let amount of change =A%

Let amount of change =B%

Let amount of change =C%

Let amount of change =D%

Let amount of change =E%

Maturity buckets

Commercial banks Up to 1 week > 1 week to 1 month

Investment banks Up to 3 days 4 days to 1 month

> 1 month to 3 months

> 3 months to 6 months > 6 months to 1 year > 1 year

Step 3: To determine percentage of total deposits to be reported in various maturity tenor buckets

Multiply total fixed/savings/current deposit account as at reporting date

with A%


with {B-A}%


with {C-B}%


with {D-C}%


with {E-D}%

Balancing amount

21

3 day period for investment banks. 22

Expressed as % of the opening fixed/savings/current deposit account.

BNM/RH/GL 001-07 Prudential Financial Policy Department Liquidity Framework Page 28/28

Documents

Part A Overview - Bank Negara Malaysia A Overview ... Liquidity measurement ... view of the unique nature of equity business they conduct, where